Newly approved Palestinian Authority budget includes historic corporate net income tax cut
The $45 billion 2022-2023 state budget passed by the Pennsylvania General Assembly this week will deliver a historic reduction in net corporate income tax (CNI), bringing it down from 9.99% to 8.99% next year, a measure that could revive economic growth across the Republic.
“Great news – The Palestinian Authority has enacted a groundbreaking tax reform! This opens the door for more businesses to locate and grow in our state. This is a great example of how legislative bipartisanship can benefit to all citizens, the Pennsylvania Chamber of Commerce and Industry tweeted Friday after the state Senate approved the budget. The state House of Representatives passed the budget on Thursday. The budget now goes to Governor Tom Wolf’s office for signing into law.
The reduction of the CNI tax is part of the tax code reform budget package, which also includes solutions to many other problems, including the capping of tax credits, deductions and deferrals for the exchange of goods as well nature, and the exemption of Gold Star families from inheritance tax, among other elements.
“The state is in a position where it can repay taxpayers’ investments,” said state Rep. David Rowe (R-Snyder/Union). “This tax code bill would do that by bringing relief to Pennsylvanians and reversing decades of harmful tax policies that have hindered economic growth.”
PA House Bill 1342 would also benefit small businesses impacted by pandemic-era shutdowns and tax policies by allowing them to defer tax liability on gains from similar property exchanges, which is allowed in 49 other states. said Rowe, who added, “I was very happy to support this bill.
Specifically, the measure also provides for an additional 0.5% reduction in the CNI tax rate each subsequent year until the rate reaches 4.99% by 2031.
“Based on current state corporate tax rates, the full reduction moves Pennsylvania from the highest CNI tax rate in the nation to the sixth lowest by 2031 and is the first rate change since 1995 — giving our economy a vigorous boost in our article — pandemic recovery,” said PA Chamber President and CEO Luke Bernstein.
The benefits of a more competitive corporate tax code, Bernstein said, go far beyond simply improving the state’s business climate.
In fact, according to the PA Chamber, studies have shown that a decrease in the CNI tax rate leads to increased GDP, higher wages and increased home values, all of which create jobs to support family needs and attract and retain new talent.
The reduced CNI tax rate is its first cut since 1995 and the first major tax cut in Pennsylvania since the decision to phase out the capital and franchise tax in 2002, according to PA House GOP members who have supported the bill.
“We need to improve our economy,” State Representative Marci Mustello (R-Butler) said. “Pennsylvania’s current CNI tax rate — the second highest in the nation — has been punitive and a giant stop sign for businesses looking to come to Pennsylvania.”
Pennsylvania Rep. Chris Quinn (R-Delaware) agreed, saying he’s proud of his success in reducing “the job-destroying effect of the nation’s second-highest CNI tax.”
In addition to serving as a barrier to growth, the current high CNI tax rate has also led the state government to pick winners and losers through an unbalanced system of individual tax regimes to encourage growth and investing when the current fiscal climate would otherwise prohibit it, the PA House GOP said.
But with the House voting 180 to 20 to approve the budget, House GOP leaders hailed the spending plan as historic in its investment in Pennsylvania that includes fiscally responsible provisions that would provide stability for years to come.
Importantly, they said, the state budget for fiscal year 2022-23 uses state funds to responsibly meet the immediate needs of Pennsylvanians while building the Commonwealth for Solvency and making the state competitive with other states to attract job creators who will drive long-term growth. .
“At a time when the stakes are so high and taking a realistic view of our future economic prospects, this budget benefits the people of Pennsylvania today while preparing us for a stable Commonwealth tomorrow,” said the leader of AP House Majority Kerry Benninghoff (R-Center/Mifflin).
“The budget we adopted [July 7] is the most comprehensive budgetary legislative package I have seen in a long time. This is a budget that puts the needs of the people before the needs of the government,” added PA House Appropriations Committee Chairman Stan Saylor (R-York).
The budget includes a version of a proposal put forward by Sen. Ryan Aument (R-36) to reduce the CNI tax rate. “Reducing our corporate net income tax will bring more high-quality jobs to our state, raise wages for workers, increase home values, and increase economic opportunity for Pennsylvanians in all classes, all walks of life. sectors and all corners of the Commonwealth,” Aument said.
In addition, the tax reform package also includes more relief for small businesses, giving them the ability to defer personal tax liabilities through similar exchanges of certain goods – another long-standing goal centered on PA House members, who said this provision allows employers to invest in job-creating assets that businesses need to stay competitive.
Previously, Pennsylvania was the only state in the nation that did not offer this type of deferral, according to the chamber.
An additional element of the package aligns the state tax code with federal tax law by allowing small businesses to deduct eligible equipment purchases from personal income tax, just as federal tax law provides in under section 179. This change makes it easier for employers to purchase equipment and invest, which in turn promotes job growth.
Sen. Camera Bartolotta (R-46) said, “This budget rightly prioritizes initiatives to benefit workers in Pennsylvania, who have been hurt by Governor Tom Wolf’s pandemic shutdowns and have yet to recover. Whether it’s being displaced from their industries or struggling to find affordable child care, people need help. This funding will better position them for long-term success and financial independence.
Bartolotta, who chairs the Senate Labor and Industry Committee, also said she was pleased to see the budget included significant investments to boost the state’s workforce. “This budget includes more funding for apprenticeship training to continue a proven skills training model that allows individuals to earn money while learning the path to family careers. It invests more in New Choices/New Options, a program designed to help individuals re-enter the workforce.
Pennsylvania’s new fiscal year began July 1.